TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 133
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....oices between 01.08.2023 and 26.09.2023 amounting to Rs. 6,58,38,774/-, against which the Respondent made part payments totalling Rs. 4,30,03,081/-, the last being on 09.07.2024. Upon non-payment of the remaining dues, the Appellant issued a demand email dated 12.09.2024 claiming Rs. 2,28,35,693/-, enclosing reconciled ledgers. As per the invoice terms, any issues relating to the quality of goods had to be raised within 15 days of delivery. No such objections were raised by the CD within the stipulated period. On 08.11.2023, the CD, via email, shared its ledger reflecting an outstanding debit balance of Rs. 6,58,11,511/- payable to the Appellant. Appellant further submitted that on 12.09.2024, the Appellant issued a formal demand email seeking payment of Rs. 2,28,35,693/-, warning that legal action would be taken in case of non-payment. Instead of replying to the said email or raising any genuine dispute, the Corporate Debtor (CD), uploaded fabricated E-way bills worth on the GST portal, purporting to reflect return of goods. These were unsupported by any invoices, delivery challans, or other contemporaneous documentation. Upon objection by the Appellant on 13.09.2024, the CD withd....
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.... Adjudicating Authority erred in dismissing the Section 9 petition despite the established operational debt and absence of a real pre-existing dispute. It is prayed that the appeal be allowed and the petition admitted. Submissions of the Respondent 7. The Respondent and the Appellant had been in a business relationship for the past one and a half decades. However, after September 2023 the Respondent stopped purchasing raw material from the Appellant. The ledger accounts provided by the Appellant, along with the supporting documentation, can be carefully reviewed to find that the dispute arose in September 2023 when the Appellant supplied inferior-quality goods to the Respondent, and the Respondent stopped purchasing the raw material from the Appellant, who used to buy millions' worth of raw material from the Appellant. 8. The Director, Sh. Sangect Jain, on behalf of the Appellant company, visited the office of the Respondent, where it was agreed that the raw material would be lifted once another party desired to buy the same. The Respondent has communicated with the Appellant from time to time, both telephonically and during one-on-one meetings with the director of the Appellant....
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....porate bookings given by the principal supplier to the Respondent. The two debit notes dated 01.10.2024 were raised for the interest charged on the monies used by the Appellant, amounting to Rs. 95,757/- and amounting to Rs. 7,97,976/-. 11. Further, it is not out of place to mention herein that the Appellant is demanding the payment of invoices raised from 1st August 2023 until 26th September 2023 amounting to Rs. 2,28,35,693/-. The debit balance shown on the ledger accounts as of 31st July 2023 was Rs. 8,83,38,823/- which clearly shows that the Appellant used to maintain the running accounts of the Respondent. It is the balance shown on the debit side for which the Corporate Debtor had filed the petition in the Adjudicating Authority, which was rightly dismissed. For the sake of argument, although not admitted even a pinch, if the contention of the Appellant is demanding the payment of 51 invoices raised from August, 2023 until September 2023, then it must be noted that after August, 2023, the Respondent has transferred more than the invoiced amount. 12. The Respondent had raised concerns regarding: quality of goods; corporate discounts assured but not passed on; warehousing cos....
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..... As held by the Hon'ble Supreme Court in Maxim India Integrated Circuit Design (P) Ltd. v. Andappa (2025) 3 SCC 84 relying on Ramjas Foundation v. Union of India (2010) 14 SCC 38 a party that withholds material facts is not entitled to judicial relief. 17. The Appellant's conduct demonstrates a clear intent to misuse the IBC as a recovery tool rather than a resolution mechanism. The invocation of the IBC is improper where there are contested claims and counterclaims requiring adjudication - precisely the rationale given by the Adjudicating Authority issued the Impugned Order. This is impermissible in view of the law laid down in Mobilox Innovations Pvt. Ltd. (supra) and S.S. Engineers y. Hindustan Petroleum Corporation Ltd., (2022) 7 SCC 250. Adjudicating Authority has correctly applied the test laid down in Mobilox Innovations Pvt. Ltd. (supra) - the dispute must meet the following criteria i.e. the dispute must exist prior to the demand notice, be bona fide, and not be spurious; require further examination; and be based on plausible contention. All the above-mentioned criteria are clearly satisfied in the present case. The Respondent's objections to quality and pricing were sp....
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....,28,35,693/-, which is the total outstanding against the 51 invoices raised between 01.08.2023 and 26.09.2023. Appellant claims that no explanation has been given by the CD as to why the CD had released an amount more than Rs. 4 crores if the accounts were not reconciled and also no objections were raised by the CD from 08.11.2023 till 19.10.2024 regarding the quality of goods, corporate discounts, or warehouse charges, neither were any requests for return of goods were made. Further on 12.09.2024 at 12.46 pm, the Appellant sent a formal email demanding the balance dues to the tune of Rs. 2,28,35,693/- and warned that legal action would be initiated if the balance is not cleared. Instead of responding to the email dated 12.09.2024 or paying the already admitted dues, the CD on the same date i.e. 12.09.2024 at 04:07PM, uploaded fabricated E-way bills worth Rs. 1.06 Crores on the GST portal on the very same day, purportedly showing return of goods. These E- way bills were not accompanied by any invoices, delivery challans, acknowledgment of return, or GST payment. Upon objection by the Appellant vide email dated 13.09.2024, the CD admittedly withdrew the fabricated E- way bills. The ....
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....d on purported "Journal Vouchers" however they were not raised by the CD at any point of time prior to 19.10.2024. Further, no reason or explanation has been provided by the CD as to why even after issuance of email dated 12.09.2024 by the Appellant demanding payment of outstanding dues, the CD failed to respond to the said email immediately and send the purported "Journal Vouchers" instead of waiting for more than a month to provide the same with email dated 19.10.2024 issued the CD creating the Journal Vouchers as an afterthought to evade the admitted liability. 25. It is the case of the CD during oral arguments and in the written submissions (though not the pleaded case either before this Hon'ble Tribunal or the Ld. Adjudicating Authority) that ledger placed on record for the period between 01.04.2022 to 08.11.2023 shows entries pertaining to sales return amounting to Rs. 3,23,58,775/-. However, the said entries pertain to the invoices issued prior to 08.11.2023, and even after taking into account the sales returns, the balance outstanding despite the sales return is Rs. 6,58,11,511/- as admitted in the CD's ledger [@ Pg 119/Appeal]. The sales return entries in the ledger as hi....
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....as in fact reiteration of the claims made in its e-mail of 19.10.2024), by mere denial of the same. The assertion, that the self-serving debit notes were not shared with the OC earlier, is evidently not correct since the e-mail of 19.102024 was available with it prior to the issue of the demand notice. Above all, it is noteworthy that no comments have been offered on the matter of pre-existing dispute by the OC either in its rejoinder or its oral submissions." 27. Furthermore, adjudicating authority has come to the following finding: "In the present case, the contentious nature of claims is amply established by the prior dispute borne out by the CD's email dated 19.10.2024. These contentions, may require further detailed examination, particularly concerning the issues of corporate discounts offered by M/s Century Paper & Pulp; supply of inferior quality of raw materials supplied by the OC; payments made in cash and also transfer through its sister concern by the CD; acknowledgement of these payments by the director of the OC in his own handwriting; expenses incurred towards warehouse charges by the CD etc. However, summary jurisdiction of this Authority does not allow adjudicat....
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.... show that on 19.10.2024 Respondent had raised disputes for quality, discounts etc., which is prior to the issue of the Section 8 demand notice and it is also raised in its reply of Section 8 demand notice. Therefore, in the facts and circumstances of the case, we find that there is a pre-existing dispute with respect to the reconciliation of the accounts which is noted by even the Adjudicating Authority and we do not find this dispute to be as spurious or illusory. 30. We also note that in Sabarmati Gas Ltd. (supra), it was held that unresolved account reconciliation amounts to a pre-existing dispute, and accordingly, dismissal of a Section 9 Application on this ground was upheld. The Hon'ble Supreme Court in the case of Sabarmati Gas Limited (supra) has held that failure of reconciliation of accounts qualifies as a pre-existing dispute. The rejection of Section 9 application on the grounds of such "pre- existing dispute" was upheld. The relevant portion of the judgment is reproduced below: "55. In this context the meaning of the word "reconciliation" is to be looked into. Going by Black's Law Dictionary, 10th Edition, the apt meaning suitable to the situation in relation to ac....
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....of Section 9 application under IBC." 31. Appellant has placed its reliance on the judgement in Surendra Sancheti (supra), wherein this Appellate Tribunal held as follows: "Coming to our analysis and findings, we notice that no material has been placed on record by the Corporate Debtor to show that they had categorically rejected the outstanding dues claimed by the Operational Creditor prior to issue of demand notice. There is no evidence of any outright denial of the liability to pay which has been placed on record by the Corporate Debtor. Furthermore, we notice that Corporate Debtor while admitting the outstanding debt had also admitted in the same breath that they were working to promote the global presence of the Operational creditor in India which affirms that there were no differences between them with regard to the agreement basis which they were conducting their business operations. When we look at the impugned order, we find that the Adjudicating Authority has considered the entire gamut of facts holistically. We are also satisfied with the findings of the Adjudicating Authority that facts on record speak loud and clear that the Corporate Debtor/Appellant all along admit....